Metro Manila (CNN Philippines, December 23) — Interest rate for loans provided by lending and financing firms will soon have ceilings, the Bangko Sentral ng Pilipinas announced Thursday.
In a briefing, BSP Governor Benjamin Diokno said the caps — approved by the Monetary Board on Dec. 16 and to take effect Jan. 3 — will cover interest rates, penalties, and other fees and charges on small-value, short-term, general purpose and unsecured loans extended by these companies and their online lending platforms.
The rate limits cover loans ₱10,000 and below, and can be settled within four months.
The approved ceiling for the nominal interest rate, which is the percentage of the amount borrowed excluding other fees and charges, is 6% per month or approximately 0.2% per day.
Lenders can impose an “effective interest rate” of up to 15% per month or about 0.5% per day. This covers the nominal interest rate along with applicable charges like processing, service, and verification fees but not penalties for late or non-payment.
The Monetary Board set the cap on penalties for late payment or non-payment at 5% monthly on the outstanding scheduled amount due.
It also approved a total cost cap of 100% of the total amount borrowed — applying to all interest, other fees and charges, and penalties — regardless of how long the loan has been outstanding.
“In determining the interest rate caps, the Bangko Sentral ng Pilipinas sought to maintain a balance between protecting consumers and allowing lending and financing companies to price in credit risks and remain viable,” said Diokno.
The application of interest rate ceilings is in line with Republic Act. 9474 or the Lending Company Regulation Act of 2007 and RA 8556 or the Financing Company Act of 1998, he added.
These allow the Monetary Board to prescribe maximum interest rates these firms can charge in consultation with the Securities and Exchange Commission and the industry, he said.
“The circular is being finalized. Plan is to have it be effective by Jan. 3,” said Dennis Lapid, director of the BSP Department of Economic Research, adding that a review will be done every year on the interest rate ceilings.
The SEC is also tasked to report to the BSP on the compliance of lending and financing companies with the ceiling and submit an evaluation report, he added.
The commission, which regulates lenders and financing companies, will formulate and promulgate the issuance of the upcoming circular’s implementing rules and regulations within 60 days of effectivity date.
